Inside a 30 billion-dollar business

The 30 billion dollars readymade garment (RMG) sector employs 3.6 million workers in Bangladesh. It is by far the largest employer of women workforce in formal sector. Unfortunately, it is increasingly getting difficult for this huge workforce to make ends meet on their present wages. Some of the recent surveys carried out on livelihood of garment workers well captured the hardship. One such survey shows that an overwhelming majority of RMG workers use toilet and kitchen on shared basis (86% and 85% respectively) in their rented houses as they cannot afford renting a room with independent kitchen and toilet facilities. The survey, conducted by the Centre for Policy Dialogue (CPD) by collecting data from 3,856 factories having 3.6 million workers, finds out that the RMG workers possess very scanty household assets – nearly 40% workers don’t have any table, 44% don’t have any chair to sit in their homes.

CPD finds it really depressing that 17% workers don’t have any bed to sleep and they sleep on the floor. Approximately 70% workers don’t have stand and rack and nearly 80% don’t have any wardrobe in their rooms. Bangladesh Garment Sramik Sanghati (BGSS) conducted another survey between June and July this year among 200 workers working at 31 RMG factories. It says nine in every 10 workers in RMG sector quit their jobs within years after joining it as they cannot endure the excessive work they have to do in the sector in Bangladesh. It says many of them have to lend money to survive which is not sustainable and have to work an average 60 extra hours a month in addition to routine daily duty thereby, depriving themselves from adequate rests and sleeps.

These surveys brought to the fore the issue of the economic hardship that the RMG workers are faced up with at a time when a Ministry of Labour and Employment-formed minimum wage board has been in operation since March, 2018 with a mandate to recommend minimum wages for the thousands of workers in the sector whose overall cost of living has increased by 17 percent per year between 2013 and 2018. The year 2013 was the last time when RMG sector’s salary structure was revised. As against Tk 5,300 minimum wage declared in 2013, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) that represents RMG owners, is proposing a minimum wage of Tk 6,360 now, far short from the amount (Tk. 16,000) the workers are asking for.

Interestingly, the Bangladeshi RMG factory owners who cater to all the big names in the world of garment buyers and retailers – H&M, Walt-Mart, Levi’s, GAP, Hugo Boss, Carretow and Old Navy to name a few, and dream of fetching USD 50 billion from exports by 2021, are now claiming that they are in the soup too. There must be legitimate reasons why they have started a wage bargain in the minimum wage board with such a low ‘floor price’ (offering just Tk. 6,360 against a five-year old minimum wage of Tk. 5,300). Unless they are walking a tightrope, there shouldn’t be any reason why owners, who fetch precious export earnings for the country, would deprive the very workers who are making the garments. One needs to comprehend the owners’ perspective before blaming them outright for not paying the workers enough. From an emergency general meeting that the two main representative bodies in the country’s RMG sector – BGMEA and BKMEA – co-organised, on last Sunday, the RMG factory owners made an urge to the government to give them an ‘exit plan’ so that the RMG units which want to leave the business for ‘non-viability’ can do so. They claimed 1200 units were shut down in post-Rana Plaza years. RMG owners also demanded the government to introduce inflation-based yearly wage increase system on permanent basis instead of the existing system of raising wage in every 5-year by forming a commission.

This writer identifies at least two genuine reasons why RMG owners are at their wits end when it comes to workers’ salary revision. Firstly, their inability to fight for a business climate, where they would no longer require spending money on services that they are supposed not to spend. It is evident from the speech of an ex-president of BGMEA Atiqul Islam that he delivered in the recent BGMEA-BKMEA emergency meeting. He spoke very clearly that RMG owners could have paid the workers better had they (owners) not been forced to spend extra bucks in bond license renewal and on other services in this crucial export earning sector. So fighting corrupt practices, unmasking the regulators, service providing officials who tend to earn quick bucks from RMG owners and exporters should be priority. Workers who toil in Bangladesh’s RMG units have all the rights to ask for better pay and facilities but if a business climate riddled with grafts deprive them of that the State and business fora must look into it with topmost priority.

Secondly, the RMG leaders need to show their bargaining skills as much at buyers’ end as they do at minimum wage board. They are, indeed, arguably good at making bargains at minimum wage board when it comes to paying more to the workers. But it appears that they are quite bad bargainers when it comes to seeking the just prices of the products from the buyers and retailers. They settle cheaply. The international brands make best out of the deals with exporters happy with their little share of profit. In this whole scheme of things there is almost none to think for the RMG workers, who are struggling on a daily basis making their ends meet with low monthly pays. More than two-thirds of the profit in the RMG sector is taken away by the brands and buyers. The RMG producers and exporters in Bangladesh have to remain content with the lesser share of profit and as a result our local factory owners always remain under pressure to sustain in the global competition. In the post-Rana Plaza period many of the RMG units have gone out of business while many others have gone green (environmentally sound, less carbon emitting) and yet more transforming them into compliance factories. But question remains – are the factory owners, exporters getting any financial dividend for going green, or going compliant? For the sake of equilibrium wages in the RMG sector, the business leaders need to develop their bargaining skill at global stage of apparel merchandising. A just formula must come by through strong bargaining process for the sake of establishing right share of profit for our products. The equilibrium market wage rate is at the intersection of the supply and demand for labour. Employees are hired up to the point where the extra cost of hiring an employee is equal to the extra sales revenue from selling their output. If we fail to ensure right deals the business volume may still grow from USD 30 billion to USD 40 billion to USD 50 billion but that would not add value to the quality of livelihoods of thousands of RMG workers.

To initiate a bargain on better price deal and just share of profit, the big guns should come forward first then the others will follow suit and add value. In Bangladesh, only 7.4 percent of the 3,856 RMG factories are large, 42.5 percent are medium and about 50 percent are small. They need to raise their voice in unison so that global brands no longer afford to deprive them of their due share of profit. If that can be ensured, the Bangladeshi RMG owners will be better poised to offer far better wages than they typically offer now to their workers. In this fight, in fact, the RMG owners can take their workers along by taking them into confidence. A congenial work atmosphere has to be established first. But for now it is found out that 97.5 percent factories don’t have trade unions. A comprehensive survey on RMG sector conducted by Centre for Policy Dialogue (CPD) recently found out that the workers’ organisations continue to remain in either weak or non-functional in the garment factories. Addressing a recently held seminar on this issue, CPD Chairman Prof Rehman Sobhan, rightly pointed out that a global consultation is required for social improvement of the RMG workers who should be given the most credits for success of the garment sector. He said the government and parliament can play the vital role for the improvement of the situation by ensuring the sharing of profit for the garment workers as there is now prevailing an unfair and unjust situation. He said that one-third of the parliament members are garment owners but added that he does not know how many trade union leaders are parliament members from the RMG sector.

Speaking at the same event FBCCI president Shafiul Islam Mohidddin admitted that there is lack of trade union activities in the RMG sector but said that workers welfare committees in the factories are working to protect the interest of the workers. He said 70 percent profit in the RMG sector is taken away by the brands and buyers for which local factory owners always remain under pressure to sustain in the global competition. He said in the post-Rana Plaza period most of the factories were transformed into compliance factories while many are trying to convert them into green factories.

Within days of RMG owners demand for tax incentives as an offset against additional expenditures they have to bear for paying higher wages to workers in line with wage board’s upcoming recommendations, government on Monday brought down source tax on export proceeds and lowered the corporate tax as well. It’s understandable that government would provide the RMG owners as much tax benefits as possible in an election year but at the same time it must be mindful of the agonies of a bigger constituency – thousands of workers and their families. Maintaining a congenial atmosphere in the sector by balancing rights, entitlements and profits of RMG workers and owners is all the more crucial considering the fact that Bangladesh’s export trade is now fully dominated by the ready-made garments industry. Bangladesh’s garment exports – mainly to the US and Europe – made up 83 percent of the country’s export income.

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